Vivad Se Vishwas 2024: New FAQs from Income Tax Department Explained

The Indian Income Tax Department released Circular No. 19 of 2024 on December 16, 2024, notifying new frequently asked questions ( FAQs ) to address concerns regarding the Direct Tax Vivad Se Vishwas Scheme, 2024 ( DTVSV Scheme ).

What is the Vivad Se Vishwas Scheme, 2024?

The scheme enacted under Chapter IV of the Finance (No. 2) Act, 2024, provides a mechanism for settling income tax disputes. Taxpayers with pending disputes can declare their intent, settle their cases, and avoid lengthy litigation. The scheme became operational on October 1, 2024, and the rules and forms were issued earlier on September 20, 2024. Let’s see the highlights of the circular.

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Eligibility Criteria

Appeals Pending as of July 22, 2024: Taxpayers whose appeals were pending as of July 22, 2024, are eligible for the scheme, even if the appeals were later disposed of before filing the declaration. The appeals against tax intimations under Section 143(1) qualify for the scheme if they were pending on the specified date.

Delayed Appeals: Appeals filed after July 22, 2024, along with applications for condonation of delay, are not eligible under the scheme. However, appeals filed with delay condonation requests before July 22, 2024, and subsequently admitted, are considered eligible.

Excluded Cases: Certain cases are explicitly excluded from the scheme, such as those involving search assessments under Sections 153A or 153C. Similarly, appeals pending in review petitions or before the Income Tax Settlement Commission ( ITSC ) are not eligible.

Handling Prosecution and Penalty

Prosecution: Taxpayers can avail themselves of the scheme even if prosecution proceedings are initiated after filing a declaration. However, if the prosecution relates to a different assessment year, it does not affect the eligibility of other years.

Penalties: Penalties unrelated to quantum assessments, such as those under Sections 271B and 271BA, can be settled independently. Settling quantum appeals automatically provides immunity from penalties related to those appeals.

Tax Payment and Deadlines

Lower Rates for Early Filing: Declarations filed by December 31, 2024, benefit from reduced payment rates under the scheme. However, payments must be made within 15 days of receiving Form No. 2 to complete the process.

Credit for Taxes Paid: Taxes paid before filing a declaration will be credited against the disputed amount, providing relief for taxpayers who have already made partial payments.

Special Cases

Transfer Pricing: Secondary adjustments under Section 92CE are applicable unless the primary adjustment pertains to assessment years before April 1, 2016. This ensures that older adjustments are exempt from secondary implications.

Set-Aside Appeals: Appeals set aside to ITAT, CIT(A), or DRP are eligible for the scheme if they were pending as of July 22, 2024. However, set-aside matters directed to Assessing Officers are not covered.

Advance Pricing Agreements (APA) and Mutual Agreements (MAP): In cases involving APA or MAP adjustments, taxpayers must settle all issues in a pending appeal, including those related to these adjustments, as partial settlements are not permitted.

TDS Liability: Deductors are relieved from liability under Section 201(1) if the deductee resolves their tax disputes through the scheme and deductors may claim expense deductions under Section 40(a) upon such resolution.

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FAQs Released by the Income Tax Department

Eligibility

FAQ 36: Suppose a taxpayer is eligible to apply for the DTVSV Scheme, 2024, as their appeal was pending on July 22, 2024. However, before filing the declaration under the scheme, the appeal has been disposed of on merits or dismissed as withdrawn for the purposes of the scheme. Can such a taxpayer still file a declaration under the scheme?

Answer: Yes, such cases are eligible for settlement under the scheme. The disputed tax will be calculated as if the appeal pending on July 22, 2024, was yet to be disposed of.

FAQ 37: Suppose a taxpayer has filed a declaration in Form-1. After the declaration, the appeal has been disposed of by the concerned authority. Is such a case eligible for settlement?

Answer: Yes, such a case is eligible for settlement under the scheme.

FAQ 38: If the time limit for filing an appeal expired before July 22, 2024, but an appeal along with an application for condonation of delay was filed after July 22, 2024, can the taxpayer opt for the scheme?

Answer: No, appeals must have been pending as of July 22, 2024, to be eligible. Filing an appeal with a condonation application after this date does not qualify as a pending appeal on the specified date. Hence, such cases are ineligible.

FAQ 39: Suppose an appeal was filed before July 22, 2024, along with an application for condonation of delay, which was also filed before July 22, 2024. If the condonation of delay is admitted prior to filing the declaration under the scheme, is the taxpayer eligible?

Answer: Yes, in cases where both the appeal and condonation application were filed on or before July 22, 2024, and the condonation application is admitted, the case is treated as a pending appeal as of July 22, 2024. Therefore, the taxpayer can opt for settlement under the scheme.

FAQ 40: In cases where a search action was conducted before April 1, 2021, assessments for previous years (other than the search year) were made under Section 153A or 153C of the Income-tax Act, and the assessment for the year of search was made under Section 143(3). Are any of these assessment orders covered under the DTVSV Scheme, 2024?

Answer: No, such cases are specifically excluded under Section 96(a)(i) of the DTVSV Scheme, 2024.

FAQ 41: Is an appeal filed against an intimation under Section 143(1) of the Income-tax Act and pending as of July 22, 2024, eligible under the DTVSV Scheme, 2024?

Answer: Yes, appeals filed against an intimation under Section 143(1) and pending as of July 22, 2024, are eligible for settlement under the scheme.

FAQ 42: Section 248 of the Income-tax Act allows appeals by persons denying liability to deduct tax in certain cases. If tax has been paid to the government on or after April 1, 2022, appeals cannot be filed under this section. However, are appeals filed before April 1, 2022, under Section 248 eligible for the scheme?

Answer: Yes, appeals filed under Section 248 before April 1, 2022, are eligible for settlement under the scheme.

FAQ 43: If information under an agreement (referenced in Section 90 or Section 90A of the Income-tax Act) was received but not used for making additions in an assessment or reassessment order, can the taxpayer opt for the scheme for such orders?

Answer: Yes, Section 96 of the DTVSV Scheme, 2024, specifies that the scheme does not apply to tax arrears related to assessments or reassessments made based on information received under Section 90 or Section 90A. However, if the information has not been used for making additions, the taxpayer can opt for the scheme for such orders.

FAQ 45: Can the scheme be availed in cases where proceedings are pending before the Income Tax Settlement Commission ( ITSC ) or where a writ petition has been filed against an ITSC order?

Answer: No, such cases are not eligible under the DTVSV Scheme, 2024.

FAQs 46: Are cases where the taxpayer or the Department has filed declarations/applications under Sections 158A, 158AA, or 158AB of the Income-tax Act eligible under the scheme?

Answer: Yes, if the declaration/application was filed on or before July 22, 2024, and any related appeal for the relevant year is also settled, the taxpayer can opt for the scheme.

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Set-Aside Appeals

FAQ 47: Appeal has been set aside to ITAT/CIT(A)/DRP and was pending on July 22, 2024. Whether, in such cases, the assessee can opt for the Scheme?

Answer: Refer FAQ No. 24 of Guidance Note 1/2024. It was mentioned therein that:

"According to the Scheme, an appeal which is pending as on July 22, 2024, shall be eligible for settlement. A set-aside matter to the AO is not an appeal pending as such. Therefore, set-aside matters to the AO, whether fully set-aside or partially set-aside, are not covered under the Scheme."

However, where an appeal has been set aside fully to ITAT/CIT(A)/DRP, such appeals will be eligible for settlement.

Also, where an appeal has been partially set aside to ITAT/CIT(A)/DRP, all the issues which have been set aside will form a separate appeal and shall be eligible for settlement as such, and disputed tax will be computed as if pending at the level to which it is set aside.

Prosecution

FAQ 48: Where the prosecution proceedings have not yet been filed before a court of law, whether the assessee is eligible for the Scheme?

Answer: Yes. Reference may be made to Section 96 of the DTVSV Scheme, 2024. As per the provisions of Section 96(a)(ii) of the said Scheme, the Scheme shall not apply in respect of tax arrears relating to an assessment year in respect of which prosecution has been instituted on or before the date of filing of the declaration.

Accordingly, where the prosecution proceedings have not yet been filed before a court of law, the taxpayer can opt for the Scheme.

FAQ 49: If the prosecution is for a different assessment year and the appeal for a different one, would it debar the assessee from the benefit of this Scheme?

Answer: No. Section 96(a)(ii) prohibits such cases relating to an assessment year in respect of which prosecution has been instituted on or before the date of filing of the declaration. Thus, prosecution in one assessment year does not debar the assessee from filing a declaration for any other assessment year, if it is otherwise eligible.

Computation of Amount Payable

FAQ 50: The DTVSV Scheme, 2024 provides for different rates where a declaration is filed on or before December 31, 2024, and where it is filed on or after January 1, 2025. Please clarify whether payment of the disputed amount is also required to be made before December 31, 2024, for applicability of the lower rate?

Answer: Reference may be made to the provisions of the Scheme read with DTVSV Rules, 2024. As per Rule 3 of the DTVSV Rules, 2024, the amount payable is linked to the date of filing of the declaration. Accordingly:

• Where a declaration is filed on or before December 31, 2024, the amount payable by the declarant shall be as mentioned in column (3) of the Table specified in Section 90 of the Finance (No. 2) Act, 2024.
• Where a declaration is filed on or after January 1, 2025, the amount payable by the declarant shall be as mentioned in column (4) of the said Table.

The payment of the disputed amount is required to be made as per Section 92(2) of the DTVSV Scheme, 2024, i.e., within 15 days of the date of receipt of the certificate in Form No. 2.

FAQ 51: Whether any additional ground filed in relation to an appeal is to be considered while computing disputed tax?

Answer: If any additional ground has been filed on or before July 22, 2024, it shall be considered for the purpose of computing disputed tax.

Disputed Penalty

FAQ 52: Suppose a penalty has been levied after the taxpayer has filed a declaration for the settlement of the associated quantum appeal. In such a case, whether on settlement of tax arrears of the quantum appeal, the penalty in relation to such tax arrears would be waived off?

Answer: Reference may be made to the definition of tax arrears in Section 89(1)(o) of the Scheme. Interest chargeable or charged and penalty leviable or levied are included in tax arrears. However, the settlement for quantum appeal is made as a percentage of disputed tax, where disputed tax means income-tax including surcharge and cess. Thus, penalties leviable or levied are not included in disputed tax for the settlement of quantum appeal.

Accordingly, on settlement of the quantum appeal, the Designated Authority will grant immunity from penalties leviable or levied in respect of the tax arrears settled under the Scheme.

FAQ 53: Suppose in a case, the additions made in assessment have reached finality. There is no quantum appeal pending as on July 22, 2024. However, a penalty appeal is pending as on July 22, 2024, which relates to the additions made in the said assessment order. Can a penalty appeal be settled independent of the quantum appeal?

Answer: Penalties which are unrelated to quantum additions are clearly eligible for settlement where an appeal in respect of such penalties is pending as on July 22, 2024. These penalties are unrelated to quantum additions and therefore can be settled independently of quantum appeals.

Further, where the additions made in an assessment have reached finality and thus there is no quantum appeal pending as on July 22, 2024, there is no disputed income or disputed tax as on the specified date. Therefore, such penalties can be settled separately under the Scheme as per Sl. No. (c) & (d) of the Table in Section 90 of the Scheme.

FAQ 54: Whether appeals against penalties that are not related to quantum assessments (like penalties under Sections 271B, 271BA, 271DA of the Act) are also waived upon settlement of appeals relating to disputed tax?

Answer: No, appeals against such penalty orders are required to be settled separately.

APA/MAP Cases

FAQ 55: In the case of APA/MAP, can the Scheme be opted for settling disputes pertaining to non-APA/MAP adjustments?

Answer: The Scheme envisages settling disputes in full. The Scheme does not envisage settling issues in part. Therefore, whatever issues are there in a pending appeal are to be settled in full, whether they pertain to APA/MAP adjustments or otherwise.

Taxes Paid Before Filing Declaration

FAQ 56: Whether credit for earlier taxes paid against disputed tax will be available against the payment to be made under the DTVSV Scheme, 2024?

Answer: Yes. Credit for taxes paid against the disputed tax before filing the declaration shall be available to the declarant.

FAQ 57: In cases where an appeal is pending as on July 22, 2024, but disputed tax demands have already been fully paid before filing the declaration, are such cases eligible to avail of the DTVSV Scheme, 2024?

Answer: Yes. Reference may be made to Section 94 of the DTVSV Scheme, 2024. The situation mentioned is clearly covered in Section 94(2) of the Scheme. Accordingly, such cases shall be eligible for the Scheme.

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TDS Related Queries

FAQ 58: In cases where the deductee has settled their appeal, whether the TDS deductor would be relieved from its liability under Section 201(1) of the Act? Further, whether the TDS deductor would be allowed to claim expense deduction under Section 40(a) of the Act?

Answer: Where a deductee has settled their tax liability, the deductor is relieved from their liability other than interest payable. However, consequential relief for expense deduction under Section 40(a) of the Act shall be available to such deductor.

FAQ 59: Whether appeals filed before the Appellate Authority against intimation passed under Section 200A of the Act (regarding intimation on processing of TDS returns) can be settled under the DTVSV Scheme, 2024?

Answer: Yes, if an appeal in respect of intimation under Section 200A is pending as on July 22, 2024.

Miscellaneous

FAQ 60: Whether the Designated Authority can amend their order to rectify any patent errors?

Answer: Yes, the Designated Authority shall be able to amend their order under Section 92 to rectify any apparent errors.

FAQ 61: Where an appeal is pending in respect of a primary assessee which is a foreign entity not having adequate business presence in India, can such a foreign entity file a declaration and settle its dispute through its representative assessee having presence in India?

Answer: Yes. With proper authorization, a representative assessee can opt for settlement under the Scheme. Even in the case of a deceased taxpayer, the legal representative may also opt for settlement under the Scheme.

FAQ 62: If the taxpayer avails the DTVSV Scheme, 2024 for Transfer Pricing adjustment, will the provisions of Section 92CE of the Act apply separately?

Answer: Yes, secondary adjustment under Section 92CE will be applicable. However, it may be noted that the provision of secondary adjustment as contained in Section 92CE of the Act is not applicable for primary adjustments made in respect of an assessment year commencing on or before April 1, 2016. That means, if there is any primary adjustment for assessment year 2016-17 or earlier, it is not subjected to secondary adjustment under Section 92CE of the Act.

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